Research Note: Aminex plc (AIM:AEX)

Having previously researched Solo oil and noting that companies involvement with Aminex plc, I thought it an idea to put the operator of the Kiliwani licence under the microscope to see if it offers more potential to investors than Solo.

Aminex operates solely out of Tanzania,(though does have a non operator interest in Egypt and Moldova) through its 100% owned subsidiary Ndovu Resources Limited. Aminex is the operator of its 3 Licences in Tanzania:

Kiliwani North Development licence (65% WI)

Ruvuma Exploration Licence (75% WI)

Nyuni Exploration Licence (70% WI)

Summary of Operations

Ruvuma

The Ruvuma PSA is located in a world class petroleum province – over 100 TCF (trillion cubic feet) of gas has been discovered to date.

Ntorya-1: Drilled and tested in 2012 – 20 MMCFD with 139 bopde (barrel of oil per day equivalent) of associated condensate

Likonde-1: Drilled in early 2010, oil shows throughout a thick reservoir section. Ongoing seismic programme to help identify trap

The company states that all future discoveries can be brought onstream through the main pipeline currently under construction, reducing CAPEX.

Kiliwani North

54.575% WI (Operator)

First production from KN-1 commenced in April 2016

KN-1 gas is being processed processed at the new Songo Songo Island Gas Processing Plant and transported through the main 532km 36-inch pipeline to Dar es Salaam

The company states that this is a highly prospective licence with adjacent discoveries

Focus on deepwater prospectivity

Infrastructure in Tanzania

a 542km long (784 MMCFD) Pipeline from Dar es Salaam to the South of the country under construction

2 new gas plants (Songo Songo and Madimba)

All discoveries have route to commercialisation through the main pipeline

The location of the companies activities in Tanzania re focused around the main 36inch gas pipeline, resulting in lower CAPEX and an improved timeframe for each prospect compared to industry averages.

My Opinion:

Given the sales agreement relating to the Kiliwani prospect, the next set of results (in 4 – 6 months) should show Aminex as self sufficient as a going concern. Indeed the preliminary result sin April recorded revenue of $4.9m against cost of sales of $1.6m. Administrative expenses of $2.85m left the company with a profit before recorded impairments of $395k. This may not seem like much but we should bear in mind that the first gas sale took place in April, one third of the way through the year and, as with all oil and gas production, underwent a period of ramping up. I would anticipate sales for 2017 in excess of $9m with gross profit exceeding $6m. Indeed this is supported by the company’s May 2017 presentation which records $0.8m (net) per month to Aminex

Aminex raised $24.37 million (net) to fund the drilling of Ntorya-2 (complete) and Ntoyra-3 (and as at 31st December 2016 had $19m cash remaining). Given the expected increased revenues I consider there to be a low risk of a further fund raising this year or next, and the associated risk of dilution to the share to be low.

On 24th April, following a tripling of the resource estimate for Ntorya-2, Aminex stated that it is “currently in the process of applying for a 25-year development licence and is working directly with the Tanzanian Government to fast-track gas production for the benefit of the Company’s shareholders and the Tanzanian national economy.” Noting that Kiliwani asset took 8 years to reach production from discovery, and the Ntorya discover was made in 2012, Ntorya could be operational by 2019/20. It is important t note that Aminex holds a 75% interest in the Ruvuma licence, compared to only 54.575% in Kiliwani.

It is my opinion that Aminex is a safer investment than Solo in terms of management.

It may be that investors are holding onto Solo primarily for the Horse Hill development – the largest onshore oil discovery in the UK ever made. I am certainly of the opinion that when the Horse Hill Development comes online the stakeholders at that time will reap huge rewards. I think it’s a question of when you invest in solo, not if. Current investors may not reap the as the share price suffers from multiple dilutions in the interim period. Contrarily I believe that a person investing in Aminex at this time will continue to reap the rewards further down the line with limited risk.

I personally may purchase AEX in the near future – noting current share price weakness I’m aiming to get in at 3p or under. My long term target price of the share is 8p (subject to any fundraising in the interim), though I do not expect this to be reached until 2020.

Don’t be Shy

Follow me on Twitter

Legal

Disclaimer
The information on this site is for information purposes only. Risky Bear, its affiliates and content licensors assume no liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon. The information contained about each individual and firm has been supplied without verification by us.
Where any financial information is provided by the Risky Bear, its affiliates or content licensors, it is done so without considering the investment objectives, financial situation and particular needs of any person. Before acting on any general advice, you should consider its appropriateness to your circumstances.
The information may be based on assumptions or market conditions and may change without notice. No part of the information is to be construed as a solicitation to make a financial investment.